The U.S. Department of Health and Human Services’ Office of Inspector General (OIG) posted Advisory Opinion 21-02 (AO21-02) on April 29, 2021. AO21-02 is noteworthy for the OIG’s analysis of the proposed investors in an Ambulatory Surgery Center (ASC) under the federal Anti-Kickback Statute (AKS). The proposed investors include a health system, a management company and certain health system employed physicians, some of whom could not meet basic requirements of the AKS safe harbor applicable to ASC investments. For example:
- The health system, the management company and the physician investors could make or influence referrals to the new ASC for items and services reimbursable by Federal health care programs. For example, the health system has control over its employed physician investors and is clearly in a position to influence referrals to the ASC.
- Some of the physician investors did not derive at least one-third (1/3) of their medical practice income from the performance of procedures that will be reimbursed by Medicare if performed in an ASC (“Qualified Procedures”) for the previous fiscal year or 12-month period (the “1/3 test”), as required to meet the ASC safe harbor.
Despite these issues, the OIG considered several mitigating factors in reaching its conclusion that the investment returns for each investor would not constitute impermissible remuneration under the AKS. In doing so, the OIG took the somewhat unusual step of relying on the health system’s certification that physician investors who did not meet the 1/3 test would use the new ASC on a “regular basis” as part of their medical practices. This may be an important development especially in light of the list of Qualified Procedures which has expanded since adoption of the ASC safe harbors. The OIG also relied on the health system’s certification that physician investors would rarely refer patients to each other for Qualified Procedures, as well as the health system’s estimation that each physician investor would personally perform almost all ASC-qualified procedures that he or she refers to the ASC.
Additionally, the requesting parties certified that ownership in the new ASC would not be based on the previous or expected volume or value of referrals. Given that each individual physician’s ownership is expected to range from 4% to 8%, and that AO21-02 does not include any information about how the parties reached these equity allocations, it is unclear how the OIG reached this conclusion. Regardless, the OIG’s decision not to impose sanctions may signal a willingness to ease certain ASC investment requirements that involve hospitals, physicians and management companies.
AO21-02 is available here: https://oig.hhs.gov/fraud/docs/advisoryopinions/2021/AdvOpn21-02.pdf. As always, OIG advisory opinions may only be relied upon by the requesting parties. No health care entity should enter into an arrangement such as described in AO21-02 without consulting experienced health care counsel.